Market Watch

HMV, Debenhams and Carpetright will all be in the spotlight this week during a busy few days for the retail sector.

The market will be keen to hear HMV's views on the impending VAT hike to 20 per cent and the Budget decision to axe video games tax relief when the retailer reports annual results on Wednesday.

HMV's figures are forecast to show a rise in profits, to 74 million in the year to 24 April from 63m a year earlier.

This is despite disappointing fourth-quarter figures for its main HMV chain in the UK and Ireland, which saw like-for-like sales plunge 13.2 per cent in the final 16 weeks of the year.

But its Waterstones chain had a better final quarter – showing an improvement in recent sales trends.

The retailer suffered a disappointing Christmas season, but with new leadership and a plan to increase non-book sales it slowed the decline in like-for-like revenues to 4.8 per cent in the past three months.

Retailer Debenhams will give an update on trading since the half year on Thursday, with investors keen to hear whether sales have remained in positive territory.

The chain said like-for-like sales had grown 0.3 per cent in the five weeks to 3 April, helped by demand for exclusive ranges such as its Designers at Debenhams lines, which includes clothing from John Rocha, Jasper Conran, Betty Jackson and FrostFrench.

The group has already said it expects the second half to be "broadly neutral" for the firm.

But stable trading is a welcome development for the firm as its fortunes have turned around in recent years after a period of lagging performance and debt woes.

Half-year profits rose 18.6 per cent to 123.6m as it has concentrated on margins, shifting its stores around to give its own-bought products more prominence.

Results from flooring firm Carpetright should see profits surpass the lows of the previous year but trading remains tough amid a period of consumer retrenchment.

The group's pre-close update at the end of April said recent sales had fallen short of hopes, while Carpetright chairman and chief executive Lord Harris – a veteran with more than 50 years in the business – expects current trading to remain "challenging".

Pre-tax profits are expected to come in at 28m for the year to May – above last year's 17.2m but still less than half the 62.1m of 2008.